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FAQs on the Non-Resident Property Income Tax
I think I may have paid this. How can I tell?
This non resident tax issue can be confusing. Why should owning a holiday home entail paying income tax? There is no equivalent in the UK, and no one from the government informs non residents of their obligation to pay the tax and submit the form. In fact a lot of holiday home owners are oblivious to the requirement or think they already paid.
This is because they have paid local property taxes: Impuestos sobre Bienes Inmeubles ("IBI"). But IBI is a second tax that has to be paid apart from the Form 210 income tax. It is paid by all property owners, residents and non residents alike, and it is set and collected by the town hall, very like council tax in the UK. It is usually collected every Autumn and you get the amount on an IBI statement through the post - but not always, especially in smaller towns and villages, where the due date may be 'broadcast' by a Bando Municipal, a print out hung in local bars and other busy places.
So if you are a typical holiday home owner, the question to ask yourself is have I paid both my local (IBI) taxes to the town hall and my income tax to the national government (Form 210)?
What if I don't submit a form and pay the tax?
The government doesn't force payment of the income tax element and many people don't hear about it and fulfil their obligation to declare and pay it. Initially there may be no adverse consequences but the local tax office (the Agencia Tributaria for your area) know the status of all properties from the IBI and other records and know whether they are owned and occupied. It is a simple task for them to identify which property owners are (a) non resident and (b) not declaring their taxes.
That said, many people go years without being caught up in tax office investigations. The problem often only arises when non residents come to sell their properties. In this case the seller is obliged to pay 3% of the sale price to the tax office which is only recoverable by the non resident seller when they are up to date on taxes including capital gains tax on the sale and, increasingly, the form 210 tax. This may then require multiple form 210s to be submitted going back several years with fines and penalties.
What if I have to catch up back year taxes?
You can easily catch up on old years with unpaid taxes, but there are interest costs and penalties. Before 2008 the tax was higher as well because Spain had not yet abolished its "wealth tax". On the plus side there is a statute of limitations that applies to unpaid Spanish tax which means that tax is not collectable after four years. If you want advice on the costs and implications of unpaid taxes including back years. It may not be as painful as you think.
How does the tax get paid?
Assuming you have a Spanish bank account with sufficient funds to pay the tax, your bank details can be included on the form so the authorities can deduct the payment automatically.
If you do not have a Spanish bank account you will have to make arrangements with whoever you have filling in the form.
Can I do it myself?
Probably. The calculation of the tax is very simple (see below). Payment is quite easy too as you can either set up a direct debit or take your completed form 210 into the bank and pay it there. You can get the form off the Tax Office website here:
Spanish tax form 210 download
With a reasonable level of Spanish you will be able to work through it (there are instructions on the link). Note that there were some changes to the Form 210 system in 2011.
How much is the tax?
The tax is calculated as 24% of the “income” the Spanish authorities deem you could make renting out the property. This is calculated as 2% of the rateable value (reduced to 1,1% for areas re-rated after 1994). If you only owned the house for part of the year the tax is pro-rated down to the period of ownership. If there are multiple owners (e.g. husband and wife) they pay an equal share of the total tax but must each submit a return. The rateable value is the “valor catastral” found on the IBI (rates) bill you get every autumn.
The key is to find out what the property's Cadastral Value (Valor Catastral) is. This is on the latest IBI bill you have paid. However, if you don't have that receipt, you can obtain the Cadastral reference number (número de referencia catastral) from your local tax office (Recaudación).
According to the Spanish government, this tax is a preventative measure against the possibility that as a non-resident you may rent out the property and not declare the income from it. If you did so, you would be liable to pay 24% on that income. As a result, and in the belief that many owners do indeed rent out their property to family, friends and others on the quiet, Form 210 puts everyone in the same bag and charges regardless.
The 'fictitious' revenue that comes from this ownership is estimated by law at 1.1% over either 50% of the price of purchase or the cadastral value given by the Town Hall and 24% tax on that amount.
For example: a new property bought for €286.000. 50% of the price is €143.000, 1.1% of this amount is the 'fictitious' revenue, or €1.573. Thus the tax payable is 24% of €1.573, so the final due figure is €377,52.
The total amount due is then divided equally among as many people on the Title Deeds. In the example above, then, a property owned by three people would be liable for €125.84 each.
When is it payable?
You must make your return for a given year by the end of the following year, so for the 2010 tax year, you should declare and pay before 31/12/2011.
My lawyer takes care of this. Is that OK?
Most law firms offering conveyancing services to foreign property buyers will then offer to become a “fiscal representative” taking care of all related tax affairs. That is fine except that having a fiscal representative is not really necessary if you have simple tax affairs and it can be expensive. It is much less costly to have this one-off annual tax handled by a Gestoría, or a resident you know.
What should I do?
If your situation is simple i.e. you own one property which you do not rent out and have no other complications, then you might want to consider doing the tax return yourself or paying about €30.
Stick with your fiscal representative if you think they are worth the annual fee; e.g. because they offer valuable advice as well as filing the return or because your affairs are more complicated than the standard holiday property owner. An example of this might be if you rent out your property for part of the year which involves a lot more in the way of reporting. Note that residents of countries without a Spanish tax treaty must have a fiscal representative if they own property in Spain. Most countries, like the UK, have treaties with Spain but tax havens like Gibraltar and some other territories do not.
Am I resident or non resident?
A pretty easy question to answer for most of us: if you have a holiday home in Spain which you use periodically but actually live in your home country and pay taxes there you are non resident for this purpose. If you live in Spain and only occasionally return to your home country where you have cut most ties then you are more than likely tax resident in Spain and should register as such. Note that failing to register as tax resident does not stop you becoming liable for Spanish resident taxes!
Of course there may situations which are not so clear cut e.g. during a transitional year when you are settling in Spain. The rule of thumb is that spending over half the year in one country makes you tax resident but there are a lot of subtleties and variations. Where your family or business is based can be a factor. If you require clarification, we advise you contact a lawyer.
What if I do rent the house out?
Non residents who rent out their property should declare the income filing a Form 210 and paying 24% tax, with some deductions for allowable expenses, within a month of receiving each payment or when a payment falls due, whichever is earlier. In practice most non resident property owners take advantage of the quarterly reporting option; most lawyers and larger Gestorías have services that cover this reporting.
Remember that this tax, the Non-Resident Property Income was created precisely because so many non-resident property owners were/are renting them out and not paying tax on the income. In other words, the majority pays for the minority - again.